1. Main points

UK gross domestic product (GDP) was estimated to have increased by 0.4% in Quarter 3 (July to Sept) 2017, a similar rate of growth to the previous two quarters.

Services increased by 0.4%, the same rate as Quarter 2 (Apr to June) 2017 and remains the largest contributor to GDP growth, with a strong performance in computer programming, motor trades and retail trade.

Manufacturing returned to growth after a weak Quarter 2 2017, increasing by 1.0% in Quarter 3 2017.

Construction has contracted for the second quarter in a row, although the industry still remains well above its pre-downturn peak.

GDP per head was estimated to have increased by 0.3% during Quarter 3 2017.

2. New model for publishing GDP

We published a response to the consultation on proposed changes to the GDP release schedule on 19 October 2017. Further details on this response are available on our Consultation Hub. In summary, an estimate of monthly GDP will be published from July 2018 (for the reference period of May) and there will be two quarterly estimates of GDP a quarter rather than the current three; the preliminary estimate of GDP will be deferred by around two weeks and the second estimate of GDP will be brought forward by two weeks to form the new first estimate, meaning the income and expenditure approaches to GDP will be made available earlier than presently. The first estimate of quarterly GDP (for Quarter 2 (Apr to June) 2018) under this new model will be published in August 2018.

3. Things you need to know about this release

Change in GDP is the main indicator of economic growth. The preliminary estimate of GDP is based solely on the output approach to measuring GDP.

The output approach measures gross value added (GVA) at a detailed industry level before aggregating to produce an estimate for the whole economy. GDP (as measured by the output approach) can then be calculated by adding taxes and subtracting subsidies (both only available at whole economy level) to this estimate of total GVA. However, as there is no information available on taxes and subsidies at this stage, the quarterly growth for output GVA is taken as a proxy for GDP growth (more information on creating the preliminary estimate of GDP is available on the methodology page of our website).

The preliminary estimate is the first of three estimates of GDP published by the Office for National Statistics, followed by the second estimate and the quarterly national accounts. In the second estimate of GDP and the quarterly national accounts, the output GVA and GDP estimates are balanced with the equivalent income and expenditure approaches to produce headline estimates of GVA and GDP. Further information on all three approaches to measuring GDP can be found in the national accounts.

All data in this bulletin are seasonally adjusted, chained volume estimates and have had the effect of price changes removed (in other words, the data are deflated).

The growth estimates within this release are created from short-term measures of output and should be considered alongside medium and long-term patterns in the series to give a more comprehensive picture. At this stage, data content is less than half of the total required for the final output estimate. The estimate is subject to revision as more data become available, but these revisions are typically small between the preliminary and third estimates of GDP, with no upward or downward bias to these revisions. More information on the data content and the monthly path of the components of the output measure of GDP are included in section 6.

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Figure 1 shows the seasonally adjusted volume series for GDP, along with quarter-on-quarter growths, over the past decade. Following growth of 0.4% in Quarter 3 2017, GDP has grown for 19 consecutive quarters.

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Figure 2 shows the average compound quarterly growth rate experienced over the five years prior to the economic downturn in 2008 to 2009, the average compound quarterly growth rate experienced between Quarter 3 (July to Sept) 2009 and Quarter 2 (Apr to June) 2014 (five years following the downturn) and the current quarterly growth rate seen in the most recent period (Quarter 3 2017). Compound average growth is the rate at which a series would have increased or decreased if it had grown or fallen at a steady rate over a number of periods. This allows the composition of growth in the recent economic recovery to be compared with the long run average.

The UK experienced slightly slower average compound GDP growth in the five years following the economic downturn compared with the five years prior; this is also true of the services industry. Figure 2 shows that in Quarter 3 2017, total GDP, construction and services were all weaker than their post-downturn average. Production grew much faster than its post-downturn average in Quarter 3 2017.

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5. Services continues to drive GDP but manufacturing also contributes as it returns to growth

In Quarter 3 (July to Sept) 2017, UK GDP was estimated to have increased by 0.4%. The services aggregate was the main driver to the growth in GDP, contributing 0.29 percentage points.

Production returned to growth, recording a rise of 1.0% in Quarter 3 2017, contributing 0.13 percentage points to GDP. Agriculture grew by 1.0%, contributing 0.01 percentage points to GDP due to the low industry weight. Offsetting these growths, construction contracted by 0.7% and contributed negative 0.05 percentage points.

Services

Services grew by 0.4% in Quarter 3 2017, the same growth as Quarter 2 (Apr to June) 2017, with all four main sectors increasing in the latest quarter.

The main contributor to growth was the business services and finance sector, which increased by 0.6%, contributing 0.19 percentage points to quarter-on-quarter GDP growth. Growth in this sector was broad-based, with employment activities being the largest contributor (Figure 3), recording growth of 3.5% after a fall of 2.4% in Quarter 2 2017 and contributing 0.04 percentage points to GDP growth.

The largest individual contributor to growth in services was computer programming activities, which grew by 1.9% and contributed 0.05 percentage points to GDP growth. This is due, in part, to its high weight within GDP. Computer programming activities are a subset of the transport, storage and communications sector, which grew by 0.1%, due to offsetting decreases in publishing activities and motion picture activities.

Distribution, hotels and catering grew by 0.4%, with wholesale trade and repair of motor vehicles being the main contributor to the growth.

Government and other services grew by 0.1%, with human health activities and education being significant contributors, reflecting their large weights within GDP.

Figure 3: Largest and smallest quarter-on-quarter contributions of industries to headline GDP growth

UK, Quarter 3 (July to Sept) 2017

Source: Office for National Statistics

Notes:

(...) represents other industries in the services aggregate.

Percentage points.

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Production

Within production, there was growth in all four main sectors in Quarter 3 2017. Manufacturing was the main contributor to the growth, increasing by 1.0%, due to growth across a number of industries, including the manufacture of transport equipment, other manufacturing and repair and the manufacture of machinery and equipment.

In addition to the manufacturing growth, mining and quarrying increased by 1.5%, electricity, gas, steam and air conditioning supply increased by 0.4% and water supply, sewerage, waste management and remediation activities increased by 0.4%.

Construction

Construction output was estimated to have decreased by 0.7% during Quarter 3 2017, following a fall of 0.5% during Quarter 2 2017.

Agriculture

Agriculture output was estimated to have increased by 1.0% in Quarter 3 2017, following a fall of 0.1% in Quarter 2 2017. Agriculture is the smallest of the main industrial groups with a weight of less than 1% in the output measure of GDP.

Figure 4 contains information about the data content for each month in Quarter 3 2017 and the quarter as a whole. The data content for the Quarter 3 2017 preliminary estimate is 44% of total output data, which is broadly the same as previous preliminary estimates.

The approach to producing the preliminary GDP estimate uses monthly output data for July and August and forecasts for estimating September. The forecasts are reinforced by early responses to our Monthly Business Survey.

Analysis of early survey returns from businesses that feed into our construction estimates has shown that these tend to be lower than returns that are made at a later point in the data collection period. As a result, a quality adjustment is applied to the quarterly estimates for construction to account for any bias introduced from the low data content available for September. These adjustments are calculated by assessing the revisions performance of quarterly construction estimates between the preliminary estimate of GDP and the second estimate over a number of periods. The adjustments are removed in the second estimate of GDP, when a full quarter of construction data are available.

More information on creating the preliminary estimate of GDP is available on the methodology page.

Figure 4: Data content within the GDP estimate

UK, Quarter 3 (July to Sept) 2017

Source: Office for National Statistics

Notes:

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The Index of Production, construction output and Index of Services all feed into the headline GDP estimate. Some small revisions have taken place to previously published estimates, as seen in Table 2. Additional detail for sectors within production and services can be found in the Monthly Path dataset, published alongside this bulletin.

Table 2: Previously published and current monthly growth rates in Production, Construction and Services

UK, Quarter 3 2017

Previously Published

Current

July

August

July

August

September1

Index of Production

0.3

0.2

0.4

0.2

0.3

Construction Output

-1.0

0.6

-0.8

0.6

-1.0

Index of Services

-0.2

…

-0.1

0.2

0.2

Source: Office for National Statistics

Notes:

1. Based on forecasts and early responses to the September Monthly Business Survey.

Data for the retail industry are broadly comparable with Retail sales in Great Britain: September 2017, published on 19 October 2017, but as the two series operate under different revisions policies, there can be timing differences in the updating of the two series. Therefore, inconsistencies between the two series are not unusual but tend to be small. There are also conceptual and coverage differences between retail sales and retail output, which can lead to apparent inconsistencies.

8. Quality and methodology

Some general information on the quality of the estimate of GDP can be found in the “Things you need to know about this release” section in the main part of this statistical bulletin. Further information is available on the methodology page of our website.

the quality of the output; including the accuracy of the data and how it compares with related data

uses and users

how the output was created

The national accounts provide an integrated description of all economic activity within the economic territory of the UK, including activity involving both domestic units (that is, individuals and institutions resident in the UK) and external units (those resident in other countries). In addition to being comprehensive, the accounts are fully integrated and internally consistent. More information can be found in the UK National Accounts: A Short Guide.